Seller Cannot Compel Arbitration for Its Role in Construction Defect Case<
March 01, 2012 —
CDJ STAFFThe buyer of a leaky home in Venice, California cannot be compelled to arbitration with the seller in a construction defect lawsuit, according to a decision in Lindemann v. Hume, which was heard in the California Court of Appeals. Lindemann was the trustee of the Schlei Trust which bought the home and then sued the seller and the builder for construction defects.
The initial owner was the Hancock Park Trust, a real estate trust for Nicholas Cage. Richard Hume was the trustee. In 2002, Cage agreed to buy the home which was being built by the Lee Group. Cage transferred the agreement to the Hancock Park Trust. Hancock had Richard Nazarin, a general contractor, conduct a pre-closing walk through. They also engaged an inspector. Before escrow closed, the Lee Group agreed to provide a ten-year warranty “to remedy and repair any and all damage resulting from water infiltration, intrusion, or flooding due to the fact that the door on the second and third floors of the residence at the Property were not originally installed at least one-half inch (1/2”) to one inch (1”) above the adjacent outside patio tile/floor on each of the second and third floors.”
Cage moved in and experienced water intrusion and flooding. The Lee Group was unable to fix the problems. Hume listed the home for sale. The Kamienowiczs went as far as escrow before backing out of the purchase over concerns about water, after the seller’s agent disclosed “a problem with the drainage system that is currently being addressed by the Lee Group.”
The house was subsequently bought by the Schlei Trust. The purchase agreement included an arbitration clause which included an agreement that “any dispute or claim in Law or equity arising between them out of this Agreement or any resulting transaction, which is not settled through mediation, shall be decided by neutral, binding arbitration.” The warranty the Lee Group had given to Hancock was transferred to the Schlei trust and Mr. Schlei moved into the home in May 2003.
Lindemann enquired as to whether the work done would prevent future flooding. Nazarin sent Schlei a letter that said that measures had been taken “to prevent that situation from recurring.” In February, 2004, there was flooding and water intrusion. Lindemann filed a lawsuit against the Lee Group and then added the Hancock Park defendants.
The Hancock Park defendants invoked the arbitration clause, arguing that Lindemann’s claims “were only tangentially related to her construction defect causes of action against the Lee Group.” On June 9, 2010, the trial court rejected this claim, ruling that there was a possibility of conflicting rulings on common issues of law. “With respect to both the developer defendants and the seller defendants, the threshold issue is whether there was a problem with the construction of the property in the first instance. If there was no problem with the construction of the property, then there was nothing to fail to disclose.” Later in the ruling, the trial court noted that “the jury could find there was no construction defect on the property, while the arbitration finds there was a construction defect, the sellers knew about it, and the sellers failed to disclose it.” The appeals court noted that while Hancock Park had disclosed the drainage problems to the Kamienowiczs, no such disclosure was made to Sclei.
The appeals court described Hancock Park’s argument that there is no risk of inconsistent rulings as “without merit.” The appeals court said that the issue “is not whether inconsistent rulings are inevitable but whether they are possible if arbitration is ordered.” Further, the court noted that “the Hancock Park defendants and the Lee Group have filed cross-complaints for indemnification against each other, further increasing the risk of inconsistent rulings.”
The court found for Lindemann, awarding her costs.
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Indemnity: What You Don’t Know Can Hurt You!
September 19, 2022 —
Caitlin Kicklighter & Bill Shaughnessy - ConsensusDocsRisk allocation between the parties is a critical component of any construction contract. Indemnity obligations can be some of the important risk-shifting provisions of any design or construction contract. Indemnity provisions typically require one party, the Indemnitor, to agree to “hold harmless,” and/or reimburse another party, the indemnitee, from claims and liability arising out of the party’s work. Considering the financial consequences that an indemnity provision can have on a construction project, it is critical that all parties to a construction contract know the legal implications of the contract indemnity provisions and understand any limitations in enforcing the indemnity provisions depending on the controlling jurisdiction. While most indemnity clauses and obligations are enforceable, many states have enacted anti-indemnity statutes prohibiting or restricting specific indemnification provisions. These anti-indemnity statutes afford protection to contractors and subcontractors not generally in a position to protect themselves from overly extensive indemnity obligations.
This article highlights several examples of indemnity provisions typically seen in construction contracts, the measures are taken by a growing number of states to protect parties with less bargaining power in the form of anti-indemnity statutes, and offers practical considerations when negotiating or drafting indemnity provisions.
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Reprinted courtesy of
Caitlin Kicklighter, Emory Law Student (2024 Graduate), (ConsensusDocs) and
Bill Shaughnessy, Jones Walker LLP (ConsensusDocs)
Mr. Shaughnessy may be contacted at bshaughnessy@joneswalker.com
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The Hidden Dangers of Construction Defect Litigation: A Redux
January 17, 2013 —
David McLain, Higgings, Hopkins, McLain & Roswell, LLCI previously wrote an article entitled “The Hidden Dangers of Construction Defect Litigation” for the Common Interests magazine, the monthly periodical of the Rocky Mountain Chapter of the Community Associations Institute. In that article, I discussed the potential negative effects of homeowners associations bringing construction defect suits as anything other than a last resort. The purpose of this post is to bring to light, by way of a real life example, the problems discussed in my previous article.
I have recently seen a lawsuit filed by an individual homeowner within a common interest community against the homeowners association, its management company, and the attorneys retained by the association to represent it in a construction defect lawsuit against the original developer, general contractor, and one of the design professionals. In his suit, the homeowner complains that the association’s construction defect attorneys “neglected to amend [their] complaint to include only and specifically the claims for damages for those properties, those buildings or condominium units, either by owner or specific locations, which had sustained damages or had faulty construction for which damages were being sought.” As a result of claiming damages throughout the entire community, the homeowner alleged that the entire community was tarred “with the black brush of litigation.”
As the homeowner explained in his complaint, he purchased a condominium for his daughter-in-law when she moved to Colorado to care for him after the death of his wife.
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David McLainMr. McLain can be contacted at
mclain@hhmrlaw.com
Arizona Supreme Court Confirms a Prevailing Homeowner Can Recover Fees on Implied Warranty Claims
August 30, 2017 —
Rick Erickson - Snell & Wilmer Real Estate Litigation BlogOn August 9th, in Sirrah Enterprises, L.L.C. v. Wunderlich, the Arizona Supreme Court settled the question about recovery of attorneys’ fees after prevailing on implied warranty claims against a residential contractor. The simple answer is, yes, a homeowner who prevails on the merits can recover the fees they spent to prove that shoddy construction breached the implied warranty of workmanship and habitability. Why? Because, as Justice Timmer articulated, “[t]he implied warranty is a contract term.” Although implied, the warranty is legally part of the written agreement in which “a residential builder warrants that its work is performed in a workmanlike manner and that the structure is habitable.”
In other words, a claim based on the implied warranty not only arises out of the contract, the claim is actually based on a contract term. Since, in A.R.S. § 12-341.01, Arizona law provides for prevailing parties to recover their fees on claims “arising out of contract” and because the implied warranty is now viewed by the courts as a contract term, homeowners can recover their fees after successfully proving breach of the implied warranty.
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Rick Erickson, Snell & WilmerMr Erickson may be contacted at
rerickson@swlaw.com
The Four Forces That Will Take on Concrete and Make Construction Smart
September 17, 2018 —
Massimiliano Moruzzi - Construction ExecutiveWhen it comes to building a bridge, what prevents it from having the most enduring and sustainable life span? What is its worst enemy? The answer is, simply, the bridge itself—its own weight.
Built with today’s construction processes, bridges and buildings are so overly massed with energy and material that they’re inherently unsustainable.
While concrete is quite literally one of the foundations of modern construction, it’s not the best building material. It’s sensitive to pollution. It cracks, stainsand collapses in reaction to rain and carbon dioxide. It’s a dead weight: Take San Francisco’s sinking, leaning Millennium Tower as an example.
Reprinted courtesy of
Massimiliano Moruzzi, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.
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Don’t Overlook Leading Edge Hazards
May 20, 2019 —
Baxter Byrd - Construction ExecutiveLeading edge hazards are often misunderstood and overlooked on today’s highly visible jobsites. Evidence is readily available via images shared on construction-related social media accounts.
In the context of people showing pride for the hard work they do or the extreme conditions under which they work, posts offer glimpses into the methods employed to mitigate fall hazards. Alarmingly, many of these methods do not adhere to industry-accepted standards, especially in the case of leading edge applications.
Mincing Words
The definition of “leading edge” itself has undergone somewhat of a transformation since its introduction by OSHA to its current use by ANSI in the Z359.14-2014 “Safety Requirements for Self-Retracting Devices for Personal Fall Arrest and Rescue Systems” standard. OSHA defines a leading edge as an “unprotected side or edge during periods when it is actively or continuously under construction,” giving many the impression that a leading edge was a temporary condition found only during the construction of a structure.
Reprinted courtesy of
Baxter Byrd, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.
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Mr. Byrd may be contacted at
info@puresafetygroup.com
Aurora Joins other Colorado Cities by Adding a Construction Defect Ordinance
September 03, 2015 —
Beverley BevenFlorez-CDJ STAFFAccording to the Aurora Sentinel, the city council of Aurora, Colorado, approved an ordinance targeted at making it more difficult for homeowners to sue builders over construction defect claims.
Similar to other recent Colorado city construction defect measures, “the new rule gives builders the right to repair defects before the litigation is pursued, requires that the majority of home owners in a home owners association – as opposed to just a majority of HOA board members – approve of any lawsuits, and allows builders to offer monetary settlements to homeowners in lieu of repairs.”
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Faulty Workmanship Exclusion Does Not Bar Coverage
November 18, 2011 —
Tred R. Eyerly - Insurance Law HawaiiThe court determined that the Faulty Workmanship Exclusion only barred coverage for damages arising from problems with the property under construction itself and not to losses incurred to correct damage from accidents during construction. See 1756 First Associates, LLC v. Continental Casualty Co., 2011 U.S. Dist. LEXIS 117100 (S.D.N.Y. Oct. 3, 2011).
A tower crane collapsed at the construction site, causing damage. First Associates tendered the claim to its insurer, Continental. Continental reimbursed First Associates for certain costs arising from damage to and cleanup of the construction site and building stemming from the crane collapse. Continental refused, however, to reimburse First Associates for costs associated with construction delays resulting from the collapse.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
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